[EN] Ello converts to Public Benefit Corporation (PBC)

A PBC is a special for-profit company in the USA that operates to produce a benefit for society as a whole.

A Better Way

Ello is a simple, beautiful, and ad-free social network.

There has been some speculation in the press since our launch eleven weeks ago that Ello will someday be forced to allow paid advertising on its network.

We understand some of this cynicism: with the Internet turning into one giant billboard, and with virtually all social networks relying on advertising to support themselves, it can be hard to imagine that there can be a better way.

But 2014 is not 2004, and the world has changed.

Ello’s explosive growth over the last few months proves that there is a hunger to connect with friends and see beautiful things — without being manipulated by ad salesmen, boosted posts, and computer algorithms that don’t always have our best interests at heart. On an ad-driven social network, the advertiser is
the customer and you’re the product that’s bought and sold.

To assure in the strongest possible way that Ello stays focused on its mission to be a different kind of social network, Ello has converted to a State of Delaware Public Benefit Corporation (PBC).

A PBC is a special for-profit company in the USA that operates to produce a benefit for society as a whole.
As a PBC, Ello is legally obligated to take its impact on society into account in every decision it makes.

Ello’s PBC’s charter states that Ello shall not for pecuniary gain:

1. Sell user-specific data to a third party;

2. Enter into an agreement to display paid advertising on behalf of a third party; and

3. In the event of an acquisition or asset transfer, the Company shall require any acquiring entity to adopt these requirements with respect to the operation of Ello or its assets.

In other words, Ello exists for your benefit, not just to make money.

Simple, beautiful, and ad-free.

There is a better way.

Enjoy Ello!

We, as founders and investors in Ello, vow to support Ello’s mission and to abide by the terms of the Ello Charter as stated above.

Ello Enshrines Ad-Free Status in Charter and Raises $5.5 Million

Ello garnered headlines — and more than a few eye rolls — last month when people finally took notice of the budding social network and its promise to keep advertising off its site.

Now Ello is making clear that its commitment to an ad-free existence is real.

The invitation-only start-up plans to announce on Thursday that it has reincorporated as a public benefit corporation whose very charter forbids the company from using ads or selling user data to make money.

“It basically means no investor can force us to take a really good financial deal if it forces us to take advertising,” Paul Budnitz, a co-founder of Ello and its chief executive, said by telephone. “It points us in the right direction, and it protects us.”

Though seemingly anathema to an Internet start-up, especially given the reams of money ad-supported businesses like Google and Facebook earn, that ideological purity has not kept the company from finding financial backers. It also plans to disclose that it has raised $5.5 million in financing from the Foundry Group, Bullet Time Ventures and FreshTracks Capital.

It is the latest move by Ello and its iconoclastic team to try a different approach in the world of social media. Created with an artistic bent — among its current users are designers, artists and a man whose public persona is a pony — the company is not necessarily aiming for world domination.

But it still aims to be profitable while sticking to its ad-free mission, with its legal charter specifically prohibiting the sale of ads or user data and declaring that any buyer of the social network must also adhere to those rules.

It is not clear by how much that stance might ultimately limit the company’s growth. But Ello points to other public benefit corporations – the sportswear maker Patagonia and the ice cream maker Ben & Jerry’s – as role models.

“There are a lot of great companies that are using this law to do good in the world,” Mr. Budnitz said.

So how does the company plan to make money? Mr. Budnitz compared Ello’s approach to Apple’s App Store: Users will eventually be able to download widgets and modifications, paying a few dollars for each purchase.

To Ello, Facebook’s approach of a one-size-fits-all template is an “old model.” Its own approach, by contrast, is essentially letting users customize their own experience.

From the beginning, Mr. Budnitz said Ello did not plan to raise much outside money anytime soon. But it hit new levels of popularity last month as the company grew from an initial 90 users on Aug. 7 to over a million now, with a waiting list of about 3 million. As a result, the team realized that it needed to raise more money to make sure that the site did not go down, as well as to finance future growth.

That surge in popularity also drew the attention of the usual giants in the venture capital world, some of whom offered to ferry Ello’s executive team around in private jets. But Mr. Budnitz said he instead turned to investors whom he could trust to back the start-up’s mission, including the Foundry Group, whom he came to know when he lived in the firm’s hometown, Boulder, Colo.

“I loved it. I was totally all in,” said Seth Levine, a managing director at the Foundry Group. “Ello isn’t saying this isn’t the only way a social network can monetize, but that this is the way they want to monetize.”

'Anti-Facebook' investors dig deep for Ello

A social network promising never to sell user data or incorporate advertising has secured multi-million dollar backing

Ello, which launched in August, has also become a Public Benefit Corporation, which prohibits its current and any future owners from breaking that promise.

The network plans to make money by introducing micro-payments for additional features.

Investors have pledged $5.5m (£3.4m).

"There are 'freemium' successes like Linked In and in gaming. Ello is taking a unique spin on this," said Lee Bouyea, of Fresh Track Capital, one of the platform's new backers.

"We are long-term investors. We have a company on our portfolio we invested in for nine years before they were successful. We look long term for a company to grow something of scale and value."

Some experts have argued that people are not prepared to pay to use social media platforms.

"You don't invite your friend to connect with you if it costs your friend money. Even in the world of digital music, you can pay for services but most people don't," James McQuivey, an analyst at tech research company Forrester, told the BBC recently.

'Tried and true'

But Ello founder Paul Budnitz insists his business can thrive without advertising or data mining.

"Our business model is tried and true - it's used all over the place, it just hasn't been applied to social networks," he said.

"You get an iPhone and it comes with basic apps - you can call, text and so on, but everybody buys apps because they want to customise their experience.

"For a few dollars, you can customise Ello to do what you want."

He added that the decision not to explore user data was already saving the company money.

"If you ask me what the demographic of the Ello user is I can't tell you - I don't know," he said.

"Maybe anecdotally but not at a granular level.

"While Ello has grown incredibly fast, we still have 14 staff.

"We're adding a few more people to help handle growth - but because we're not selling ads or mining data, there's a whole load of people we don't need to hire."